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5. Notes Payable
 3 Months Ended
Mar. 31, 2015
Debt Disclosure [Abstract]  
5. Notes Payable

Debt consists of the notes from our senior lender, Third Eye Capital, acting as Agent for the Purchasers (Third Eye Capital), other working capital lenders and subordinated lenders as follows:

 

 

    March 31, 2015     December 31, 2014  
Third Eye Capital term note   $ 7,300     $ 7,394  
Third Eye Capital revolving credit facility     21,267       22,330  
Third Eye Capital revenue participation term note     10,065       10,195  
Third Eye Capital acquisition term note     17,525       17,728  
Cilion shareholder seller note payable     5,410       5,373  
State Bank of India secured term loan     6,318       6,032  
Subordinated notes     5,282       5,428  
EB-5 long term promissory notes     19,075       1,534  
Unsecured working capital loans and short-term notes     656       1,287  
Total debt     92,898       77,301  
Less current portion of debt     12,138       12,746  
Total long term debt   $ 80,760     $ 64,555  

 

Third Eye Capital Note Purchase Agreement

 

On July 6, 2012, Aemetis, Inc. and Aemetis Advanced Fuels Keyes, Inc. (“AAFK”), entered into an Amended and Restated Note Purchase Agreement with Third Eye Capital (the “Note Purchase Agreement”).  Pursuant to the Note Purchase Agreement, Third Eye Capital extended credit in the form of (i) senior secured term loans in an aggregate principal amount of approximately $7.2 million to replace existing notes held by Third Eye Capital (the “Term Notes”); (ii) senior secured revolving loans in an aggregate principal amount of $18.0 million (“Revolving Credit Facility”); (iii) senior secured term loans in the principal amount of $10.0 million to convert the prior revenue participation agreement to a Note (“Revenue Participation Term Notes”); (iv) senior secured term loans in an aggregate principal amount of $15.0 million (“Acquisition Term Notes”) used to fund the cash portion of the acquisition of Cilion, Inc. After this financing transaction, Third Eye Capital obtained sufficient equity ownership in the Company to be considered a related party (the Term Notes, Revolving Credit Facility, Revenue Participation Term Notes and Acquisition Term Notes are referred to herein collectively as the “Notes”). The Notes mature on July 1, 2015*. On November 4, 2014, Third Eye Capital agreed to Amendment No. 8 to the Note Purchase Agreement to extend a line of credit in the amount of $6.0 million available for advance to Aemetis, such advance was added to the outstanding principal balance of the existing Notes under the Note Purchase Agreement. In addition, Third Eye Capital agreed to give Aemetis the right to extend the maturity date of the Notes to January 1, 2016 upon notice and payment of a 3% extension fee.

 

On March 12, 2015, Third Eye Capital agreed to Amendment No. 9 to the Note Purchase Agreement to allow for the repurchase of 1,000,000 shares of common stock of the Company at an average price of $5.52 per share for an aggregate purchase price of approximately $5.5 million. The repurchase price was added to the outstanding principal balance of the Revolving Credit Facility. Third Eye Capital also agreed to remove the covenant that the Company must complete an equity offering of its preferred stock for net proceeds of not less than $20 million with all of such net proceeds to be used to repay the principal outstanding under the Note Purchase Agreement.  In addition, Third Eye Capital waived the free cash flow financial covenant under the Note Purchase Agreement for the three months ended March 31, 2015. We evaluated the amendment of the Notes and applied modification accounting treatment in accordance with ASC 470-50 Debt – Modification and Extinguishment.

 

On April 30, 2015, Third Eye Capital agreed to Amendment No. 10 to the Note Purchase Agreement to allow for the repurchase of 500,000 shares of common stock of the Company at a repurchase price of $5.00 per share for an aggregate purchase price of approximately $2.5 million. The repurchase price was added to the outstanding principal balance of the revolver notes under the Note Purchase Agreement.  In addition, Third Eye Capital agreed to extend the maturity date of the Notes to April 1, 2016 upon notice and payment of a 3% extension fee.  The existing guarantees were reaffirmed. As a result of the Company’s ability to extend the maturity of the Notes under Amendment No.10, the Note balances have been classified as long term debt in the accompanying March 31, 2015 balance sheet.

  

Further details regarding the terms of the Notes are set forth below under the heading “Terms of Third Eye Capital Notes.”

 

Terms of Third Eye Capital Notes

 

Details about each portion of the Third Eye Capital financing facility are as follows:

 

A. Term Notes.  As of March 31, 2015, AAFK had $7.3 million in principal and interest outstanding under the Term Notes, net of unamortized fair value discounts of $0.2 million.  The Term Notes mature on July 1, 2015*.  Interest on the Term Notes accrues at 14% per annum.  The Term Notes contain various covenants, including but not limited to, minimum free cash flow and production requirements and restrictions on capital expenditures.

 

B. Revolving Credit Facility.  On July 6, 2012, AAFK entered into a Revolving Credit Facility with a commitment of $18.0 million.  Through various amendments to increase the amount of the credit facility available for borrowings under the Note Purchase Agreement, the outstanding amount of the Revolving Loan Facility was at approximately $22.0 million at March 31, 2015. During the three months ended March 31, 2015, interest on the Revolving Credit Facility accrued at the prime rate plus 13.75% (17% as of March 31, 2015) payable monthly in arrears.  The Revolving Credit Facility matures on July 1, 2015*. As of March 31, 2015, AAFK had $21.3 million in principal and interest outstanding, net of unamortized debt issuance costs of $0.7 million on the Revolving Credit Facility.

 

C. Revenue Participation Term Notes.  The Revenue Participation Term Note bears interest at 5% per annum and matures on July 1, 2015*. As of March 31, 2015, AAFK had $10.1 million in principal and interest outstanding, net of unamortized discounts of $0.3 million, on the Revenue Participation Term Note.

 

D. Acquisition Term Notes.  The Acquisition Term Notes accrue interest at prime rate plus 10.75% (14% per annum as of March 31, 2015) and mature on July 1, 2015*. As of March 31, 2015, Aemetis Facility Keyes had $17.5 million in principal and interest outstanding, net of unamortized discounts of $0.5 million, on the Acquisition Term Notes.

 

         *The note maturity date can be extended by the Company to April 2016. As a condition to any such extension, the Company would be required to pay a fee of 3% of the carrying value of the debt.

 

The Third Eye Capital Notes are secured by first priority liens on all real and personal property, and assignment of proceeds from all government grants and guarantees from Aemetis, Inc.  The Notes all contain cross-collateral and cross-default provisions.  McAfee Capital, LLC (McAfee Capital), solely owned by Eric McAfee, the Company’s Chairman and CEO, provided a guaranty of payment and performance secured by all of its Company shares.  In addition, Eric McAfee provided a blanket lien on substantially all of his personal assets, and McAfee Capital provided a guarantee in the amount of $8.0 million.

 

Cilion shareholder seller notes payable.  In connection with the Company’s merger with Cilion on July 6, 2012, the Company issued $5.0 million in notes payable to Cilion shareholders as merger compensation subordinated to the senior secured Third Eye Capital Notes.  The liability bears interest at 3% per annum and is due and payable after the Third Eye Capital Notes have been paid in full.  As of March 31, 2015, Aemetis Facility Keyes, Inc. had $5.4 million in principal and interest outstanding under the Cilion shareholder seller notes payable.

 

State Bank of India secured term loan.  On July 17, 2008, Universal Biofuels Private Limited (“UBPL”), the Company’s India operating subsidiary, entered into a six year secured term loan with the State Bank of India in the amount of approximately $6.0 million.  The term loan matured in March 2014 and is secured by UBPL’s assets, consisting of the biodiesel plant and land in Kakinada.

 

In July 2008, the Company drew approximately $4.6 million against the secured term loan.  The loan principal amount is repayable in 20 quarterly installments of approximately $0.3 million, using exchange rates corresponding to the date of payment, with the first installment due in June 2009 and the last installment payment due in March 2014.  As of March 31, 2015, the 12% interest rate under this facility is subject to adjustment every two years, based on 0.25% above the Reserve Bank of India advance rate.  The principal payments scheduled through March 2015 were not made.  The term loan provides for liquidating damages at a rate of 2% per annum for the period of default. As of March 31, 2015 and December 31, 2014, the State Bank of India loan had $2.7 million and $2.6 million, respectively, in principal outstanding and accrued interest plus default interest of $3.6 million and $3.4 million, respectively. See Note 6 - Commitments and Contingencies for further details.

 

Subordinated Notes.  On January 6 and January 9, 2012, AAFK entered into Note and Warrant Purchase Agreements with two accredited investors pursuant to which it issued $3.0 million in 5% annual interest rate notes to the investors (the “Sub Notes”).  An additional $0.6 million and $0.8 million in Sub Notes were added to one of the existing accredited investor’s Sub Notes balance in May and December 2012, respectively.  This same accredited investor received payments of $0.6 million in principal and $3 thousand in interest in July 2012. The Sub Notes included 2-year warrants exercisable for 170 thousand shares of Aemetis common stock at a price of $0.01 per share, subject to adjustment.  Interest is due at maturity.   Neither AAFK nor Aemetis may make any principal payments under the Sub Notes until all loans made by Third Eye Capital to AAFK are paid in full, except for a few exceptions where Sub Note investors will receive funds from EB-5 investments or sale of equipment.

 

The Company agreed to an Amendment No.1 to the Sub Notes to extend the maturity of the January 2012 Sub Notes to July 1, 2014 and refinanced the additional December 2012 Sub Note as two Sub Notes dated December 2012 and January 19, 2013, with principal amounts of $0.5 million and $0.1 million, respectively. Both the December 2012 Sub Note and the January 19, 2013 Sub Note had a maturity date of April 30, 2013. On January 24, 2013, an additional $0.3 million Sub Note was issued with a maturity date of April 30, 2013. On May 23, 2013, all Sub Notes above with a maturity date of April 30, 2013 were refinanced as a $1.0 million Sub Note (“May 2013 Note”) with a maturity date of December 31, 2013. On January 1, 2014, the May 2013 Sub Note was amended to extend the maturity date to June 30, 2014 in exchange for (i) a 10 percent cash extension fee paid by adding the fee to the balance of the new note and (ii) 30 thousand in common stock warrants with a term of two years and an exercise price of $0.01 per share. In March 2014, the Company received $0.5 million from EB-5 investments and paid to one of accredited investors holding a January 2012 Sub Note of $0.5 million. On July 1, 2014, the January 2014 Sub Note and two January 2013 Sub Notes with two accredited investors were amended to extend the maturity date to December 31, 2014 in exchange for (i) a 10 percent cash extension fee paid by adding the fee to the balance of the new note and 118 thousand in common stock warrants with a term of two years and an exercise price of $0.01 per share.

 

On January 1, 2015, the Sub Notes above were amended to extend the maturity date until the earlier of (i) June 30, 2015; (ii) completion of an equity financing by AAFK or Aemetis in an amount of not less than $25.0 million; (iii) the completion of an Initial Public Offering by AAFK or Aemetis; or (iv) after the occurrence of an Event of Default, including failure to pay interest or principal when due and breaches of note covenants. A 10 percent cash extension fee was paid by adding the fee to the balance of the new note and 116 thousand in common stock warrants were granted with a term of two years and an exercise price of $0.01 per share. We evaluated these January 1, 2015 amendments and the refinancing terms of the notes and determined in accordance with ASC 470-50 Debt – Modification and Extinguishment that the loans were extinguished and an extinguishment loss of $0.3 million recognized in the three months ended March 31, 2015.

 

On March 24, 2015, the Company paid off $180 thousand in subordinated note principal and interest held by one of the accredited investors with the money received from the EB-5 program.

  

On January 14, 2013, Laird Cagan, a related party, loaned $0.1 million through a promissory note maturing on April 30, 2013 with a five percent annualized interest rate and the right to exercise 5 thousand warrants exercisable at $0.01 per share. In February 2015, the Cagan related party promissory note was amended to extend the maturity date until the earlier of (i) December 31, 2016; (ii) completion of an equity financing by AAFK or Aemetis in an amount of not less than $25.0 million; (iii) the completion of an Initial Public Offering by AAFK or Aemetis; or (iv) after the occurrence of an Event of Default, including failure to pay interest or principal when due and breaches of note covenants.

 

At March 31, 2015 and December 31, 2014, the Company owed, in aggregate, subordinated notes in the amount of $5.3 million and $5.4 million in principal and interest outstanding, net of unamortized issuance and fair value discounts of $0.6 million and $0.2 million, respectively.

 

EB-5 long-term promissory notes.  EB-5 is a US government program authorized by the Immigration and Nationality Act designed to foster employment-based visa preference for immigrant investors to encourage the flow of capital into the U.S. economy and to promote employment of U.S. workers. On March 4, 2011, and amended January 19, 2012 and July 24, 2012, the Company entered into a Note Purchase Agreement with Advanced BioEnergy, LP, a California limited partnership authorized as a Regional Center to receive EB-5 investments, for the issuance of up to 72 subordinated convertible promissory notes bearing interest at 3%, each note in the principal amount of $0.5 million is due and payable four years from the date of the note for a total aggregate principal amount of up to $36.0 million.  The notes are convertible after three years at a conversion price of $30.00 per share.

 

Advanced BioEnergy, LP arranges investments with foreign investors, who each make investments in the Keyes plant project in investment increments of $0.5 million.  The Company sold notes in the amount of $1.0 million during the first quarter of 2012, $0.5 million during the first quarter of 2014 and $17.5 million during the first quarter of 2015. As of March 31, 2015, $75 thousand in accrued interest remained outstanding on the notes.  The availability of the remaining $17.0 million will be determined by the ability of Advanced BioEnergy, LP to attract additional qualified investors.

 

Unsecured working capital loans.  In November 2008, the Company entered into an operating agreement with Secunderabad Oils Limited (“Secunderabad”).  Under this agreement, Secunderabad agreed to provide the Company with working capital, on an as needed basis, to fund the purchase of feedstock and other raw materials for its Kakinada biodiesel facility.  Working capital advances bear interest at the actual bank borrowing rate of Secunderabad of fifteen percent (15%).  In return, the Company agreed to pay Secunderabad an amount equal to 30% of the plant’s monthly net operating profit.  In the event that the Company’s biodiesel facility operates at a loss, Secunderabad owes the Company 30% of the losses.  The agreement can be terminated by either party at any time without penalty.

 

During the three months ended March 31, 2015 and 2014, the Company made principal payments to Secunderabad of approximately $0.7 million and $1.5 million, respectively, under the agreement and interest payments of approximately $37 thousand and $51 thousand, respectively, for working capital funding.  At March 31, 2015 and December 31, 2014, the Company had approximately $0.7 million and $1.3 million outstanding under this agreement, respectively.

 

Scheduled debt repayments for loan obligations follow:

  

Twelve months ended March 31,   Debt Repayments  
2016   $             12,138  
2017                 61,879  
2018                   3,160  
2019                 17,500  
Total debt                 94,677  
Discounts                 (1,779)  
Total debt, net of discounts   $             92,898